Question

Suppose that on January 6, 2016, Westfall Motors paid $360,000,000 for its 40% investment in Phase Motors. Assume Phase earned net income of $20,000,000 and paid cash dividends of $25,000,000 to all outstanding stockholders during 2016.
Requirements
1. What method should Westfall Motors use to account for the investment in Phase Motors? Give your reasoning.
2. Journalize all required 2016 transactions related to Westfall Motors’s Phase investment. Include an explanation for each entry.
3. Post all 2016 transactions to the investment T-account. What is its balance after all the transactions are posted? How would this balance be classified on the balance sheet dated December 31, 2016?


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  • CreatedJune 15, 2015
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